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Russia will become the leader in the growth of the banking system in Eastern Europe
The Russian financial system is one of the most dynamic markets in European emerging economies. According to a study by the international consulting company Oliver Wyman, in the coming years the fastest growth will be observed in Ukraine, Russia and Turkey. Russia is expected to account for 40% of total revenue growth.The main reason for the impressive growth of the banking systems of developing countries, company analysts cite the high rates of economic growth in these countries, which average 5% per year. As you know, GDP growth in Russia last year was 6.8%; this year, according to the updated forecast of the Ministry of Economic Development, it is expected to be 7.4%.
Currently, the total revenue of banks in developing economies is $55 billion, while, according to Oliver Wyman, it will grow annually by an average of 13% per year and will amount to $170 billion by 2015. The revenue of Russian financial institutions will grow faster - by 15% per year.
The Russian banking sector in terms of cost-income ratio is one of the most profitable in Europe. The expected growth will be achieved primarily through the development of the corporate and investment (18%), as well as retail (14%) sectors. According to company analysts, investments in the commodity market will become the main driving factor of growth. As you know, the largest Russian oil and gas companies are very actively attracting borrowed bank funds. As a result of such transactions, the Russian financial market ranks second in terms of growth among all emerging markets.
Another significant difference between the Russian system and other Eastern European countries is the low level of penetration of foreign banks. While the markets of most countries in the region have reached a saturation point in this regard and offer little scope for outside mergers and acquisitions, in Russia international banks occupy just over 20% of the market. Four of the six largest Russian banks, owned directly or indirectly by the state, account for more than 50% of the market. According to the study, unlike other developing countries in Europe, Russian banks are able to independently meet the growing needs of the economy and foreign capital will not dominate the market in the coming years. Therefore, the company's analysts recommend that foreign investors pursue a very restrained policy in Russia. “Despite the fact that there are about 1,200 financial institutions operating in the Russian market, very few of them have an extensive regional network, the acquisition of which would allow us to immediately take a large market share,” says Thomas Raab, managing director of Oliver Wyman in Germany, Austria and Eastern Europe. “In addition, Russian banks are much more active than their counterparts in developing Europe in participating in mergers and acquisitions and are serious competitors to foreign investors.”
The company believes that the most effective strategy for developing a bank in Russia is to specialize its business in a specific sector or region with good growth potential. They consider attempts to create a network throughout the country to be ineffective. In the area of banking products, new and existing market players are advised to focus on the corporate lending sector.
Top 10 players in the banking markets of Eastern Europe
| 1. | Unicredit Group | Italy | 17 | 109 | 13 |
| 2. | Sberbank | Russia | 1 | 85 | 100 |
| 3. | Erste Bank | Austria | 7 | 63 | 35 |
| 4. | RZB | Austria | 15 | 46 | 45 |
| 5. | Societe Generale | France | 8 | 42 | 4 |
| 6. | VTB | Russia | 4 | 39 | 100 |
| 7. | KBC Group | Belgium | 8 | 39 | 12 |
| 8. | Bank OTP | Hungary | 8 | 28 | 100 |
| 9. | PKO BP | Poland | 2 | 27 | 100 |
| 10. | Banca Intesa | Italy | 7 | 25 | 9 |
Source: Mercer Oliver Wyman analysis